TARGETED ADVERTISING, OR hyper-targeted advertising, which is the topic for a CTAM Canada session today in Toronto, is destined to be the prime topic in broadcast, advertising, buying and distribution circles in the coming months.
Thanks to a New Jersey company, Invidi, the software which will allow advertisers to much more specifically target TV viewing customers is ready for prime time, in all senses of that term.
Want to send the Upper Canada Lager ad to only the top demographic? No problem. And, while you’re at it, send a Sleeman ad during the same 30 seconds to a broader one and a Coors Light ad to another demo, still.
What if a broadcast client is an advertiser worried about sending sale ads with just a few days shelf life to an increasingly growing PVR-using audience? No problem, that ad can be automatically swapped for a new one when the customer decides to view their recorded program.
But the device able to pull the consumer data needed and then to enable this type of targeting is the cable or satellite digital set top box. The distributors, the gatekeepers, hold the keys to this new, potentially more lucrative, way of selling television advertising. Will there be a meeting of the minds between broadcasters and BDUs?
Heck if David Downey, CEO of Invidi is half-right, the increase in revenue (i.e. much more money) will make it happen. What follows is an edited transcript of a conversation between Downey (right) and www.cartt.ca editor and publisher Greg O’Brien.
Greg O’Brien: I was hoping first to just get a sense of what the American appetite is right now for targeted advertising?
David Downey: It’s definitely a hot topic. You don’t have to stray very far from the front pages of the New York Times or Wall Street Journal business sections to get your daily dose of it. We’ve been at the development phase of this for several years now and have a product that’s essentially completed which works very efficiently on both the Scientific-Atlanta and Motorola platforms.
GOB: That’s your Advatar, right?
DD: Yes. And, we’re actually hoping to get it out into the field in the first quarter of next year – and would hope to do that with a slew of different cable operators. We’re also developing product for the satellite space, which will effectively do the same kind of thing.
GOB: Now, are the media buyers and advertisers in the States asking for it?
DD: I think the world is asking for it. Certainly, there’s no question whatsoever that the advertisers are moving towards advertising technologies that assure them that they’re getting what they’re paying for. The existing system, while it certainly has its foundation in the best available information from the past (ratings), certainly is nowhere near as accurate as the digital technologies can provide you today.
So, with systems like ours you’ll have the ability – and it’s a novel concept – to get what you pay for and know that you did. We’re going to dispel John Wanamaker’s famous quote of years gone by when he said he knew that half of his advertising dollars were being wasted, he just never knew which half.
GOB: What about from the broadcaster point of view? Is this something they’re thinking seriously about yet?
DD: Sure. Every company in the distribution curve – broadcast television stations, broadcast affiliates, satellite television stations and local cable operators – all found their way to our facilities in the last couple of years, as well as the largest advertisers in the world.
And so, this is technology that people recognize is coming and everyone is trying to sort out how they’re going to play a role in the process.
GOB: Sticking with that broadcaster point of view, since the cable and satellite companies sort of own the keys to the addressability aspect of it with the set top boxes, the broadcasters will have to come to some sort of deal with the cable companies to be able to target viewers like this, right?
DD: The broadcasters will have to come to some sort of arrangement if they wish to participate. But, by the same token, broadcasters have by far the most to gain after completing that deal because they currently have the best programming content and theoretically get the highest rates for their advertising. Today in Canada a broadcaster might have the rights to hockey or a soccer match or such and they run a commercial for Mercedes Benz or Lexus. Right now they run that commercial and they charge what they can for it but only five to seven percent of the audience can go buy that Mercedes.
In the future, the broadcaster will be able to run four or five commercials during those high-end sporting events (at the same time), targeting each of the groups that a product is suitable for. So, in theory, they should be able to get double or triple the amount of revenue that they get from a current spot. It’s more than enough money to justify cutting the deal that they’re going to have to with the cable operators.
And, what we like about Canada and one of the main reasons that Canada is one of our focus countries outside of the United States, is because your existing regulation is such that the broadcasters and the cable operators aren’t in the same battle for spot dollars that we have here.
So, here’s a unique opportunity for the broadcasters to cut a deal with the cable operators. The cable operators finally get a little piece of the (advertising) pie through this negotiation and the broadcasters raise their revenue results. In the States, we don’t see those negotiations going as smoothly as we would anticipate it could (in Canada)
GOB: Because U.S. cablecos sell local avail ad time in competition with local broadcasters.
DD: That’s right.
GOB: I’ve brought up this topic with a few broadcasters and others up here and there doesn’t seem to be too much talk between the broadcasters and cable companies or satellite companies on this yet.
DD: I would hope not because we haven’t talked to anyone yet, and the last time I checked, it’s going to take our software to make all this happen. Just in the last month of so, we’ve begun to look at the whole world and we have discussions ongoing with people in China, Mexico, Canada, etc., and each one of those parts of the world have different regulatory hurdles and so we have to figure out how to accommodate each of the nuances the governmental walls require.
GOB: When it comes to a deal between cable operators and broadcasters, what kind of revenue are we talking about and what sort of percentage split will there be. Has there been any sort of consensus on that?
DD: I don’t know if they’re thinking if it’s going to be percentages or a transaction fee or if will it be something that I haven’t thought of. Will it be wrapped into issues relative to retransmission consent or distribution of different channels? There’s a whole slew of issues that need to be sorted out that are unique to the country and situation and the parties that are out there.
For example, one of our customers, Time Warner, owns its own broadcast television division with the WB Network. So, they might choose to do nothing, first of all. But, if they do choose to do something, maybe they first do it internally and see how it goes. They also own the Turner Broadcasting networks, so Time Warner was a customer we were most interested in associating with initially because they’re one of the top five advertisers in the world, so they understand advertising. They own a major broadcast network, they own the second-largest cable company in the States and they’re in the Internet space, where they’re used to buying on impressions.
It’s really hard to say though, how people will facilitate the use of it. But, what we’re trying to do is stay out of that. We want to provide our product and do it in such a fashion where we don’t create any more obstacles that are already out there.
GOB: Tell me about Advatar and what it does.
DD: It’s a very small application that sits on the digital set top box that is designed first and foremost to preserve the privacy of the information that we use for the purpose of calculating in aggregate which households should receive particular commercials. Through a combination of static data such as the geographic location of the box and the income average of a 300-500 home area surrounding that location, we’re able to discern both the physical location and the likely income of the household relatively easily.
We also then figure out the age of the person who is in control of the remote control and the likely gender of that person through reverse-reflecting the click-stream data against the available programming information associated with each show.
So we take Nielsen or BBM data and on a real-time basis develop a vector that lives inside the box that essentially calculates: “this person is now watching a sports program and then went to a news program and then went to a home building program”, and so the male-ness needle is now 72%, so we infer that it’s likely a male.
Over time, that becomes fairly accurate and it also allows us to assimilate the composition of the household. So, over a fairly short period of time, we get the sense that at this particular residence, there’s a mom and a dad and a son and a daughter, or whatever, and their likely ages and then geography and income sort of flows through.
Similarly, we also then converge on ethnicity based upon program selection as well as geographic location. So the five characteristics that we presently default against: age; gender; income; geographic location; and ethnicity.
But, that’s the tip of the iceberg. We can, over time, add more rules and figure out ways to advance in that direction.
GOB: Does it calculate it on a household basis or box-by-box?
DD: Box-by-box. So you could, for example, be watching the same program on multiple TVs and let’s say your son is watching a hockey game upstairs and you’re watching it downstairs, you’ll get the minivan commercial and he’ll get the Xbox 360 commercial.
It’s based on the set top location, which is really quite cool, and it also, over time, will calculate whether or not you’re watching individually or with someone else. So, if you’re sitting on the couch with your daughter and bouncing back and forth between the 24-hour news channel and The Smurfs…
GOB: Or Sunday Night Football and TreehouseTV like I was doing last night.
DD: That’s right. There may be some sense that there’s more than one viewer in the room at the time.
This works with linear TV very effectively, but it also works spectacularly well with VOD and PVR services. In the case of the PVR, the commercials will be stored on the hard drive and if you choose to consume a recorded program at a later time, the system has the capability to exchange the commercials in the program to make them relevant at the time you watch it.
So, if you recorded a program on a Sunday night and it had a three-day sale at your local department store ad – but you decide to watch the program next Friday, that sale would no longer be relevant and we have the ability to update that commercial with something totally different. Something from the same advertiser.
GOB: That’s pretty cool.
DD: We’re not trying to get into any situation where we break the relationship between any of the owners of content and purchasers of advertising, we just are making it available and the people who have those relationships will need to sort out how they choose – or not – to use these products.
Some thing with video on demand. When you order a stream, the commercials that are targeted to you – not as a person, but as the aggregate mold that you fit in – will be spooled into the stream and sent to you with commercials fresh and ready to do.
So, it works across all of the current – and what we believe will be current for a while – types of distribution technology.
GOB: But does your system contemplate that when people watch (on VOD or PVR) they skip over all the ads anyway?
DD: It completely thinks through that. First of all, the reason you’re going to skip is that the commercial isn’t relevant to you. Or, because you’ve seen it too many times. So by extending to you a commercial that’s of greater interest – or something you might be interested in – you may choose to skip it but your mind will register that it’s there and maybe you’ll come back to watch it after the program or you consume it at a later date, or you actually watch when it’s there.
The system also has the capacity to do a few things which are really quite cool and one of them is that we can control frequency and separation. So, an advertiser might say, “I want my commercial to be consumed 10 times in this household on this particular box and once it’s been consumed 10 times, either don’t show it again or move to the next commercial in the campaign.
GOB: That’s pretty sophisticated compared to how it is now.
DD: Beyond that, we can also control the separation that says “If someone saw my commercial, don’t have them see it again for the next four hours or the next day or once a week or whatever you want.
I was watching football yesterday and I saw the same commercial three pods in a row. I was thinking: “Okay, I got it!” So what happened was, a) I was a little annoyed and, b) I switched the channel – which defeats the purpose of all of this.
In the future, in the on demand environment, you might have a situation where a viewer is alerted to a list of the commercials in their show. So, when would you like to consume them? Do you want to see them all now? Consume them at the end? During the show?
Or, do you not want to consume them at all and pay an extra premium?
GOB: How long have you been in development?
DD: Years, and many millions. This is not for the light-of-heart. This started out as the field of dreams where “if we build it, hopefully they’ll come.” And, now we’re beyond that point, the interest level has piqued and we’re only really interested in pursuing environments where people are dedicated to putting it in and making it work.
We’re very excited about Canada because of the unique relationship between broadcasters and cable operators. We hope that we’re successful in our endeavors there because we’d like to show the rest of the world that everyone can be a big winner if the inherent relationship issues don’t get in the way of great technology.
GOB: Don’t underestimate the animosity that often underlies the relationship between the broadcasters and the cable companies here, despite the fact they don’t compete for spot ad dollars.
DD: I’m not going to underestimate it. There’s an unnamed cable operator in the States that we made a presentation to and we showed them the potential number of billions of dollars that they could earn by facilitating the broadcast side and they looked at me and said: “We’ll never do that.”
From our perspective, we’re going to get this technology out there and we’re pricing it in such a way that it will be easy to do. Hopefully, people will find a way to play.
